Saturday, May 23, 2015

Things are escalating rapidly in the South China Sea where Beijing has figured out an innovative solution to the notion of “disputed waters.”

As regular readers are by now acutely aware, China appears to have adopted the maritime boundary equivalent of the old “possession is nine tenths of the law” axiom because Chinese dredgers have been busy for some time now creating islands out of reefs in the Spratly archipelago. Once the islands are complete, China promptly colonizes them. Next comes the construction of cement plants, ports, and 10,000 ft airstrips.

Not surprisingly, Washington isn’t fond of China’s “sandcastles” and everyone from President Obama to the Pentagon is now shouting from the rooftops about territorial sovereignty and Chinese “bullying.”

The US took it up a notch this week when it flew a spy plane over Fiery Cross Reef, presumably just to see what would happen. A CNN camera crew went along for the ride. What Washingtondiscovered is that when it comes to protecting its new islands, bashful China is not. “This is the Chinese Navy… YOU GO!” was the message that came over the radio.

The rhetoric and sabre rattling haven’t let up a bit since then and in fact, there’s been a steady stream of quotables from both sides over the past 48 hours. Here’s the latest.

The United States vowed on Thursday to keep up air and sea patrols in international waters after the Chinese navy repeatedly warned a U.S. surveillance plane to leave the airspace over artificial islands China is creating in the disputed South China Sea…

The incident, along with recent Chinese warnings to Philippine military aircraft to leave areas around the Spratly archipelago in the South China Sea, suggested Beijing is trying to enforce a military exclusion zone above its new islands there.

Some security experts worry about the risk of confrontation, especially after a U.S. official said last week that the Pentagon was considering sending military aircraft and ships to assert freedom of navigation around the Chinese-made islands.

The senior U.S. diplomat for the East Asia, Assistant Secretary of State Daniel Russel, told a media briefing in Washington the U.S. reconnaissance flight was “entirely appropriate” and that U.S. naval forces and military aircraft would “continue to fully exercise” the right to operate in international waters and airspace.

He said the United States would go further to preserve the ability of all countries to move in international waters and airspace.

“Nobody in their right mind is going to try to stop the U.S. Navy from operating – that would not be a good bet,” he said.

Chinese Foreign Minister Wang Yi last week asserted Beijing’s right to reclaim the reefs and said China’s determination to protect its interests was “as hard as a rock.”

China has also said it had every right to set up an Air Defense Identification Zone (ADIZ) in the South China Sea but that current conditions did not warrant one.

ADIZs are used by some nations to extend control beyond national borders, requiring civilian and military aircraft to identify themselves or face possible military interception.

And as if that isn’t enough, here’s more from a separate Reuters piece:

China said on Friday it was “strongly dissatisfied” after a U.S. military plane flew over part of the South China Sea near where China is building artificial islands, and called on the United States to stop such action or risk causing an accident…

Foreign Ministry spokesman Hong Lei said the Chinese military drove away the U.S. aircraft, in accordance with relevant regulations, labeling the U.S. action a security threat to China’s islands and reefs.

“Such action is likely to cause an accident, it is very irresponsible and dangerous and detrimental to regional peace and stability. We express our strong dissatisfaction, we urge the U.S. to strictly abide by international law and international rules and refrain from taking any risky and provocative actions,” he told a news conference.

It’s impossible to overstate the magnitude of what China is attempting here. Beijing has literally created new sovereign territory in the middle of the ocean and is now effectively enforcing a no-fly zone.

And despite the rheotric out of Washington regarding how no one “in their right mind” would try to curtail the movement of American military operations, that is exactly what China did this week when it essentially told the P8-A Poseidon spy plane to either stop it with the spying or become a part of a reef underneath a Chinese sandcastle.

The TPP is global domination by a fascist cartel bent on enslaving the world. Now the Senate has given fast-track authority to Obama to implement this secret plan and set fire to our Constitution, rules of law and ultimately our liberty and way of life.

Kentucky Senator and presidential candidate Rand Paul was among a host of lawmakers who staunchly opposed the secrecy surrounding the Trans Pacific Partnership bill, saying he disagrees with the proposed legislation “being held under lock and key.”

“Fast-track would allow Obama to send the Trans-Pacific Partnership (TPP) deal to Congress for an up-or-down vote” sans the ability to negotiate amendments, notes The Hill.

The TPA must still pass a House vote, which is why it’s imperative to contact your representatives and let them know you’re against H.R. 1314, the Trade Promotion Authority (TPA) or fast-track bill, which essentially grants the office of the president the power to do treaty by Executive Order.

President Barack Obama’s trade agenda took another step forward in the Republican-controlled Senate today (May 21), thanks to wheeling and dealing by Senate Majority Leader Mitch McConnell (R-Ky.) and his lieutenants, who engaged in a flurry of deal-making activity on the Senate floor. Struggling against the clock, with a jam-packed legislative schedule and a looming, week-long Memorial Day recess, Sen. McConnell put together 62 votes, 2 more than the 60-vote threshold needed to break the filibuster that was holding up the Trade Promotion Authority (TPA) bill, also known as Fast Track.

McConnell may bring up the actual TPA bill for a full Senate vote as early as Friday, May 22, or, according to some reports, may even keep the Senate in session next week for a vote, skipping the Memorial recess. Today’s vote once again displayed the odd Republican-Democrat alliance, with the Obama White House and the GOP leadership in Congress uniting to win over Democrat votes and push globalist trade deals favored by Wall Street corporatists and world government advocates.

Wednesday, May 20, 2015

Alabama Governor Robert Bentley has warned of impending cuts, including the closing of 15 of 22 state parks. Photographer: Brynn Anderson/AP Photo

Six years after the recession ended, many U.S. states are hard pressed to balance budgets because of a sluggish recovery and their own policy decisions. The fiscal fragility raises questions about how they will weather the next economic downturn.

A majority of states are making cuts, tapping reserves or facing shortfalls despite an improving national economy and stock markets at record levels, according to Standard & Poors and the Nelson A. Rockefeller Institute of Government. State revenue hasn’t rebounded to a prerecession peak adjusted for inflation, and other factors are putting pressure on budgets.

Alaska, Oklahoma and energy-producing states saw receipts fall with global oil prices. Kansas overestimated revenue after tax cuts, while New Jersey faces a shortfall thanks to unfunded pensions. Even some Republican governors have championed tax increases to avoid further diminishing services curtailed during the 18-month recession, the deepest downturn since the Great Depression.

“The extent of the weakness is really impressive,” said Donald Boyd, who tracks state finances at the Rockefeller Institute in Albany, New York. “There’s a lot of pressure on governors and legislators.”

Thirty-two states faced budget gaps in fiscal 2015 or 2016 or both, according to an April 27report by Standard & Poors. The fiscal year ends June 30 in all but four states.

The Obama administration is considering a range of options to respond to Russia’s ongoing violation of the Intermediate Nuclear Forces Treaty. Part of the response could involve deploying new U.S. weapons to Eastern Europe.

Admiral James “Sandy” Winnefeld, the outgoing vice chairman of the Joint Chiefs of Staff, told an audience Tuesday at the Center for Strategic and International Studies that Russia continues to violate the 1987 agreement, which banned both the U.S. and Russia from developing or deploying nuclear weapons with a range between 500 and 5,500 kilometers. The treaty was the first nuclear arms agreement to reduce the number of nuclear weapons.

The administration is currently debating both defensive and offensive responses, Winnefeld said, while top officials continue pushing the Russians to get back into compliance. Secretary of State John Kerry raised the issue with Russian leadership “very recently,” Winnefeld added.

“The first solution to this problem is for Russia to stop doing this. That’s the most important thing,” said Winnefeld. “That’s the way out of this problem. If it doesn’t look like that is going to happen, there are options.”

The State Department admitted publicly last July that the U.S. government believes Russia is violation of the treaty. Privately, top administration officials have known that Russia was in violation since at least 2012, because it has tested ground-based cruise missiles with the prohibited range. So far Russia has faced no punishment.

Two U.S. officials briefed on the options said that the Pentagon has submitted a list of potential countermeasures to the National Security Council, but the White House has yet to schedule a high-level NSC meeting to discuss and decide what to do. Some of the more aggressive options would include deploying more land-based military hardware to NATO allies for missile defense near the Russian border, to counter the new Russian cruise capability. Expanded targeted sanctions and added patrols near Russian space are less aggressive options on the table.

Consequences from the U.S. “would indicate to Russia that this is not going to do them any good … and would go a long way to reassuring our partners that we are very serious about wanting to keep Russia’s adherence to the treaty that we all signed so long ago,” Winnefeld said.

The State Department sent a delegation to Moscow last September to confront Russia on these treaty violations, led by Undersecretary of State for Nonproliferation Rose Gottemoeller. The delegation returned to Washington empty handed.

U.S. and Russian officials told me that the U.S. delegation refused to tell the Russians exactly what Russia had done to violate the treaty. U.S. officials said they didn’t want to risk disclosing intelligence that could compromise sources and methods, and besides, the Russians already knew exactly how they were violating the treaty.

But the Russian side used the American officials' circumspection to rebuff the accusations. In a blustery speech in February at the Munich Security Conference, Russian Foreign Minister Sergei Lavrov said the American allegations "avoid specific facts.” He went on to accuse the U.S. of violating the treaty, both by deploying ballistic missile defense elements in Europe and by using drones. (This is an odd accusation; the treaty is silent on drones.)

Russian officials told me their side wants to negotiate over the violations in a way that addresses both Russia's cruise missile programs and the U.S. missile defenses. That’s unlikely because the Obama administration has no real space to negotiate over U.S. missile defense. It already conceded to Russian demands by cancelling sites in Eastern Europe and a phase of the European missile defense program in 2009.

And that was when U.S.-Russian relations were relatively positive. Now, since Russia’s intervention in Ukraine, which included thinly veiled threats by President Vladimir Putin to use nuclear weapons, there’s no appetite in either Europe or Washington for further missile concessions to Moscow. And in Congress, pressure is mounting on the administration to do something about Russia’s nuclear weapons violations.

The House’s version of next year’s defense policy bill has some strong language regarding the violations. The bill would require the administration to tell Congress whether Russia is taking any steps to come into compliance. If not, the bill directs the president to develop military capabilities to counter the new Russian missiles.

“They need to do something about it,” Senate Foreign Relations Committee member James Risch told me. "Why have a treaty if you don’t do something about it?"

Risch said that treaties with Russia, including the New START treaty he opposed in 2010, are more trouble than they are worth because the administration never had any plan about what to do if Russia was in violation. If Russia doesn’t get back into compliance, he said the U.S. should consider withdrawing from the treaty altogether.

“Certainly, they need to have some strong understandings about whether or not everybody is going to abide by the treaty. If not, we are going to have to go in another direction,” Risch said.

Scuttling the 1987 treaty altogether by unilaterally withdrawing seems like a drastic option. That would also scuttle the verification and inspection regimes that go along with the agreement, which provide the U.S. valuable insight and reassurance about Russian nuclear activities.

On the other hand, treaties with Russia are not as beneficial as they used to be. The Conventional Forces in Europe Treaty is all but defunct. Russia blatantly discarded the Budapest Memorandum when it invaded Ukraine. In the larger view, Russia is a declining power. The U.S. may need to resume development of its own medium-range nuclear arsenal to confront this century’s biggest challenge, a rising and increasingly militaristic China.

Monday, May 18, 2015

Instead of reforming and tackling the economic problems, government always seeks to maintain the same course of thinking that now leads us to the totalitarian approach coming from Brussels.

To maintain the euro, they must maintain the banks. However, the bank reserves are debts of all member states. As government becomes insolvent as in Greece, the banking system is undermined. The only way to prevent the banking collapse is to prevent people from withdrawing cash.

Hence, we see this trend is surfacing in all the mainstream press to get the people ready for what is coming after 2015.75 – the elimination of cash. We are even starting to see this advocated in parts of Germany. We will not be able to buy or sell anything without government approval. That is where we are going, and it may be the major event that erupts after 2015.75.

The bail-in that took place in Cyprus managed to get away without bloodshed. The people just took it.

This has encouraged governments everywhere, since now they know they can safely do the same thing and the people are like sheep – dumb and stupid.

The United Nations climate czar and various alarmist media outlets this week sought to dismiss as a “joke” recent comments by a top advisor to Australian leader Tony Abbott on frauduelent man-made global warming theories being used to advance global tyranny. In an explosive column, Maurice Newman, chairman of the Prime Minister’s Business Advisory Council, argued that theories on alleged human-caused climate change were not only bogus, but are serving as the basis for imposing a totalitarian “new world order” on humanity. Despite the uproar among global-warming theorists, UN bureaucrats, and the alarmist press, the evidence suggests Newman is correct.

In the column, published May 8 by The Australian newspaper, Newman begins by blowing the lid off a “well-kept secret” — the climate models purporting to prove that man’s practically irrelevant emissions of carbon dioxide are responsible for catastrophic global warming have been proven wrong. But that is not surprising, he wrote. “We have been subjected to extravagance from climate catastrophists for close to 50 years,” he explained, citing an array of examples of climate fear-mongers and media outlets warning of global cooling and other problems just a few decades ago. The more recent pronouncements of the alarmists are equally ludicrous.

In a note sent out this morning, Bank of America Merrill Lynch has a warning for investors:

Investors remain trapped in “The Twilight Zone”, the transition period between the end of QE and the first rate hike by the Fed, the start of policy normalization...until (a) the US economy is unambiguously robust enough to allow the Fed to hike and (b) the Fed’s exit from zero rates is seen not to cause either a market or macro shock (as it infamously did in 1936-7), the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes. For this reason we continue to advocate higher than normal levels of cash, adding gold and owning volatility in mid 2015. Given extremities of liquidity, profits, technological disruption, regulation, income inequality…potential for a cleansing drop in asset prices cannot be dismissed. Most likely catalysts: Consumer, Rates, A-shares, Speculation, High Yield.

The note also highlights two interesting disconnects in the markets:

Investors say they are optimistic, but there is a high level of cash on the sidelines

U.S. stock prices are at record highs, but equity funds are seeing outflows

Regarding the first point, one of Bank of America's surveys showed investor sentiment as being “risk-on," which it says is normally associated with less cash on the sidelines.

To the second point, the note says U.S. equity funds have suffered $100 billion of outflows in 2015 while the S&P 500 is near all-time highs, which its data says isn't exactly typical.

The analysts led by Michael Hartnett attribute this to clients favoring European and Japanese equities at the expense of the U.S and that buying from those not captured in flow data (sovereign wealth funds, pension funds and central banks) could be what's giving U.S. equity indices a boost.

The note hints that that you actually ought to sell in May and go away, at least for certain asset classes.

The summer months offer a lose-lose proposition for risk assets: either the macro improves and the Fed gets to hike, which will at least temporarily cause volatility; or more ominously for consensus positioning, the macro does not recover, in which case EPS downgrades drag risk-assets lower.

New documents obtained by Judicial Watch confirm that U.S. intelligence agencies knew early on what happened in Benghazi on 9/11/2012 and why. Hint: It wasn’t about a stupid video.

The docs show that in 2012, U.S. intelligence agencies knew that weapons were moving from Libya to Syria before the attack and were already predicting the rise of ISIS and their quest to establish a caliphate. This was 17 months before the president called ISIS “jay-vee.”

Catherine Herridge reported this morning on “America’s Newsroom” that a Defense Intelligence Agency memo from Sept. 16, 2012, concluded that the Benghazi terror attack was planned at least 10 days in advance to coincide with 9/11 and was in retaliation for a drone strike that killed an al Qaeda strategist. The memo was copied to the National Security Council, the State Department and the CIA.

“The intention was to attack the consulate and to kill as many Americans as possible to seek revenge for the [U.S.] killing of Aboyahiye (Alaliby) in Pakistan and in memorial of the 11 September 2001 attacks on the World Trade Center buildings,” the memo said.

Two and a half years after the attack, Judicial Watch was finally able to obtain the memos by suing in federal court.

“The Obama administration says it was a coincidence that [the Benghazi attack] occurred on 9/11. In fact, their intelligence said it wasn’t a coincidence, and in fact, specifically the attack occurred because it was 9/11,” Judicial Watch President Tom Fitton said.

The Obama administration knew all of this on September 16, 2012 – yet White House Press Secretary Jay Carney got in front of reporters day after day, spinning tales about a spontaneous demonstration, “bad actors” with heavy weapons and a “disgusting and reprehensible” YouTube video. Instead of answering simple questions he knew (or should have known) the answers to, Carney told reporters the matter was under investigation.

Flash back to a September 19, 2012, press briefing where Carney has trouble convincing skeptical reporters of the White House spin. Note that this was three days after the DIA memos which prove that administration already knew the truth:

Q If the government still maintains that there was no evidence of a preplanned attack, how come –

MR. CARNEY: Bill, let me just repeat now, again, that based on the information –

Q But how is it that the attackers had RPGs, automatic weapons, mortars?

MR. CARNEY: Bill, I know you’ve done a little bit of reading about Libya since the unrest that began under Qaddafi. The place is — has an abundance of weapons, and there are –

Q No question about it. But do you expect a street mob to come armed that way?

MR. CARNEY: There are, unfortunately, many bad actors in that country as there are throughout the region.

Q But that’s not the point, Jay.

MR. CARNEY: And they have — they’re very armed. The point is you can make suppositions about what happened. We prefer to have an investigation that looks very closely into what happened, and assembles the facts and presents them. Based on — all I’m saying –

Q But our people on the ground have seen the fragments of the — the remains of the mortars and the heavy weapons that were used.

MR. CARNEY: We’ve been clear that there were armed assailants who used heavy weapons. We obviously haven’t disputed that. And –

Q So this is just a random crowd that got together with their heavy weapons, insulted by the film, and decided to go –

MR. CARNEY: As I think I just said, there has certainly been precedent in the past where bad actors, extremists who are heavily armed in different countries, in different regions of the world, have taken advantage of and exploited situations that have developed in order to either attack Westerners or Western assets or American assets. That is not –

Q They might plan to do it, don’t you think?

MR. CARNEY: They might or they might not. All I can tell you is, based on the information we had at the time — we have now, we do not yet have indication that it was preplanned or premeditated. There’s an active investigation. If that active investigation produces facts that lead to a different conclusion, we will make clear that that’s where the investigation has led. It’s not — our interest is in finding out the facts of what happened, not taking what we’ve read in the newspaper and making bold assertions that we know what happened. We’d rather investigate it.

__

Q So in the investigations about all the skirmishes and the initial skirmish that happened in Libya, has it been concluded that this was linked to trying to show America something on 9/11, to show anti-American sentiment on 9/11? Is that –

MR. CARNEY: April, I’ve had a lot of questions about what we know about what precipitated the attacks in Benghazi. And I said earlier and have said on previous days that, based on the information we have now, we don’t have evidence that it was premeditated or preplanned.

It is certainly the case that there are a number of bad actors and armed groups of extremists in Libya who might take advantage of a situation that was brought about initially as a response to the video in question. But this is under active investigation and we await the results of that investigation by the FBI before we can reach any firm conclusions about what precipitated the attacks.

Q Right now we should say it’s a coincidence that it all happened on 9/11?

MR. CARNEY: Right now I’m saying we don’t have evidence at this point that this was premeditated or preplanned to coincide on a — to happen on a specific date or coincide with that anniversary. If that changes, we will certainly make you aware of it.

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